LONDON, England - September 29, 2010 - "We are in the midst of an international currency war", Guido Mantega, Brazil's finance minister, declared this week. There's no quarrelling with the analysis. Around the globe, countries are engaged in deliberate policy action to weaken their currencies and thereby gain competitive advantage in trade.

Brazil is piggie in the middle; it lacks China's firepower in currency manipulation and is therefore largely powerless to prevent the inflows of hot money chasing high yield, emerging market assets. Despite action to tax these inflows, they continue unabated, pushing up the currency and making Brazilian goods less competitive.

The biggest sinner in this game of beggar thy neighbor is reasonably identified as China, but in their own particular way, Amerika and Britain are engaged in much the same thing. Massive "quantitative easing" (QE) - there are growing calls on both sides of the Atlantic for another bout of it - has effectively created a negative interest rate and debauched the currency to boot. Already the recriminations are running thick and fast.

Is this not the 1930s in redux, and therefore a threat to global stability more profound and imminent than any of the more usually identified hazards of international terrorism, nuclear proliferation and the scramble for scarce resource?

The bright new dawn of international cooperation proudly proclaimed by Gordon Brown and others when, in adversity, countries came together to fight the crisis seems to have been somewhat short-lived. Already they are fighting like cats in a bag. It looks bad, but what, realistically, are the prospects of these hostilities ending in catastrophe?

I don't want to underestimate the risks, which are plainly still high. Over the past couple of weeks, there has been an alarming escalation in the rhetoric. In the U.S., the House of Representatives was last night set to pass legislation which would make it much easier to impose sanctions against China for supposed currency manipulation. Some tit for tat trade barriers have already been erected.